macroeconomics for financial markets module

NCFM Model Test PaperMacroeconomics for Financial Markets Module Maximum Marks: 100 Test Duration: 120 minutes Pass Marks: 60 Time Left: 119:24 minutesCorrect answers are shown in green. Attempted answers, if wrong, are in red.

Q1

______ implies adjusted for inflation. [ 1 Mark ]

(a) """Positive"""

(b) """Unreal"""

(c) ?Real?

(d) """Negative"""

(e) I am not attempting the question

Q2

The ________ measures economic activity by adding all the incomes received by all the producers of output. [ 3 Marks ]

(a) expenditure approach'

(b) ?income approach?

(c) I am not attempting the question

Q3

"There have however been exceptions, when there have been sustained decline in the price level of goods and services. This phenomenon is called ______. " [ 1 Mark ]

(a) counter inflation

(b) inflation

(c) hyper-inflation

(d) deflation


Q4 A paper currency note does not have any intrinsic value or value of its own. Such type of money is called ______. [ 2 Marks ]

(a) """cash money"""

(b) """flat money"""

(c) ?fiat money?

(d) "real money"""


Q5

______ analyzes and studies decisions of individual economic agents and how they interact in specific markets and allocate their limited resources to optimize their own wellbeing. [ 2 Marks ]

(a) Macroeconomics

(b) Microeconomics


Q6

Gift tax is an example of ______. [ 2 Marks ]

(a) Direct tax

(b) Indirect tax


Q7

Governments raise resources mostly using ______. [ 1 Mark ]

(a) incentives

(b) coersion

(c) dictats

(d) taxes


Q8

____ is conventionally thought of in terms of branch plant or subsidiary company operations that are controlled by parent companies based in another country. [ 2 Marks ]

(a) FDI

(b) FPI

(c) ECB

(d) ECP


Q9 ______ is a comprehensive measure of a country's overall economic output. [ 1 Mark ]

(a) GDP

(b) ADP

(c) MDP

(d) LDP


Q10

"_______ directly adds to production capacity in the host country and, other things remaining the same, contributes to capital formation and employment generation in the host country." [ 2 Marks ]

(a) Greenfield ECP

(b) Greenfield FPI

(c) Greenfield ECB

(d) Greenfield FDI


Q11

"To know whether there has been a genuine increase in economic activity and by how much, GDP measures need to be taken at _____ prices (that is, the price level of a particular year). " [ 1 Mark ]

(a) maximum

(b) fluctuating

(c) constant

(d) minimum


Q12

One of the important characteristics of the financial markets is that it is a source of _______. [ 1 Mark ]

(a) zero risk

(b) systemic risk

(c) known risk

(d) absolute risk


Q1 "Resources are scarce, while human wants are _______. " [ 1 Mark ]

3

(a) unlimited

(b) limited


Q14

Every business enterprise involves _____. [ 1 Mark ]

(a) risk

(b) assured profits

(c) sure losses

(d) windfall gains


Q15

The essence of ________ is to explore ways to optimize the use of scare resources and to organize the society in a way that leads to the most efficient use of those resources. [ 1 Mark ]

(a) Maths

(b) History

(c) Economics

(d) Geography


Q16

Using GDP estimates at ______ prices helps us eliminate the effects of price level changes on the GDP. [ 1 Mark ]

(a) minimum

(b) fluctuating

(c) maximum

(d) constant


Q17

"Labour, capital and land are considered to be __________. " [ 2 Marks ]

(a) ?factors of production?

(b) ?factors of products?

(c) ?factors of productivity?

(d) ?factors of produce?


Q18

Share capital is a source of funds for commercial banks. [ 1 Mark ]

(a) TRUE

(b) FALSE


Q19

Usages of commodities as the medium of exchange in the early days and measure of value correspond to what we presently call ______. [ 1 Mark ]

(a) Cash'

(b) Exchange'

(c) ?Money?

(d) Coins'


Q20

_______ receipts include tax and non-tax revenue received by the government. [ 1 Mark ]

(a) Fiscal

(b) Revenue

(c) Internal

(d) External


Q21

"When a country sells its domestically produced goods and services abroad, the country is said to be ______. " [ 1 Mark ]

(a) ?exporting?

(b) importing'


Q22

M1 + saving deposits with Post office savings banks = [ 1 Mark ]

(a) M5

(b) M3

(c) M4

(d) M2


Q23

"No single commodity will give us correct picture of the general price increase in the economy. So, we must create a ______ by taking into account either all the commodities in the economy or a basket of sufficiently large number of commodities that broadly represent the economy. " [ 1 Mark ]

(a) deflation index

(b) stock price index

(c) price index

(d) inflation index


Q24

FDI stands for ______. [ 2 Marks ]

(a) Foreign Derived Income

(b) Foreign direct investment

(c) Foreign Derivatives Investment

(d) Foreign Disposable Investment


Q25

A country is said to be running a positive trade balance when its exports ______ its imports. [ 1 Mark ]

(a) exceed

(b) is less than


Q26

"Trade among developed countries could not be explained by absolute advantage. To explain this, David Ricardo propounded the law of _______." [ 1 Mark ]

(a) recovarable advantage

(b) relative advantage

(c) theoritical advantage

(d) comparitive advantage


Q27

_____ is the rate at which the central bank offers refinance to the commercial banks. [ 3 Marks ]

(a) Level rate

(b) Interest rate

(c) Duration

(d) Bank rate


Q28

The financial market for securities with maturities of less than one year is known as _______. [ 1 Mark ]

(a) derivatives market

(b) cash market

(c) money market

(d) Rupee market


Q29

A well functioning legal and a stable political system is essential for markets to operate efficiently. [ 1 Mark ]

(a) FALSE

(b) TRUE


Q30

_______means that the country is buying goods and services that have been produced abroad. [ 1 Mark ]

(a) Exporting

(b) Importing


Q31

"The Reserve Bank of India was established on April 1, 1935 under the _______, which was passed in the year 1934. " [ 1 Mark ]

(a) Reserve Bank of India Act

(b) Bank of India Act

(c) Finance Act

(d) Banking Regulator Act


Q32

"A _____ refers to a situation when an unusually large number of depositors rush in to withdraw their deposits, fearing that the bank may fail." [ 2 Marks ]

(a) bank run

(b) bank fall

(c) bank slowdown

(d) bank implosion


Q33

Capital goods tend to have a ______ lifetime. [ 2 Marks ]

(a) finite

(b) infinite


Q34

"________ expenditure involves routine government expenditure, which does not create any asset for the government. " [ 3 Marks ]

(a) Recurring

(b) Capital

(c) Depreciation

(d) Revenue


Q35

"In economics, the resources which are used to produce goods and services are called _______. " [ 2 Marks ]

(a) ?factors of products?

(b) ?factors of production?

(c) ?factors of productivity?

(d) ?factors of produce?


Q36

"Under the Banking Regulation Act, 1949, the RBI has been vested with extensive powers of supervision and control over banks." [ 1 Mark ]

(a) TRUE

(b) FALSE


Q37

_______ is a measure of the extent to which the creation of money in the banking system causes the growth in the money supply to exceed growth in the monetary base. [ 2 Marks ]

(a) Cash multiplier

(b) Money multiplier

(c) Finance multiplier

(d) Income multiplier


Q38

"When interest rates go down, prices of fixed interest bonds ?" [ 2 Marks ]

(a) Remain unchanged

(b) Go down

(c) Go up

(d) I am not attempting the question

Q39

The Forward Markets Commission (FMC) regulates ______ markets. [ 2 Marks ]

(a) equity

(b) cash

(c) finance

(d) commodities


Q40

The ________ is measured at regular intervals and changes in the index are an indicator of the average price movement of a fixed basket of goods and services (that represent the entire economy). [ 1 Mark ]

(a) inflation index


(c) deflation index

(d) price index


Q41

The wholesale price inflation is also called the ______ inflation [ 2 Marks ]

(a) advanced

(b) basic

(c) headline

(d) timeline


Q42

A ______ system will only work only if two persons can be found whose disposable possessions mutually suit each other's wants. [ 1 Mark ]

(a) payout

(b) trade

(c) transfer

(d) barter


Q43

M1 + time deposits with the banking system = [ 1 Mark ]

(a) M3

(b) M2

(c) M1

(d) M4


Q4 _______ expenditure results in creation of assets in the economy. [ 3 Marks ]

4

(a) Depreciation

(b) Revenue

(c) Capital

(d) Recurring


Q45

"The ______ revenue of the Union Government includes administrative receipts, net contribution of public sector undertakings including railways, posts, currency and mint and other revenues." [ 2 Marks ]

(a) tax

(b) non-tax


Q46

"While wheat becomes an ingredient for producing the bread, the oven is only a tool to produce it. Such goods are called _____ Goods." [ 2 Marks ]

(a) Producing

(b) Revenue

(c) Production

(d) Capital


Q47

The Inflation at any given time is measured by computing the percentage changes in the _______ at that point of time over the index prevailing one year previously. [ 1 Mark ]

(a) price index


(c) deflation index

(d) inflation index


Q48

"By taxing the income of the rich at a much higher rate than the income of the poor, the government attempts to reduce income inequality." [ 1 Mark ]

(a) TRUE

(b) FALSE


Q49

_____ are sales and purchases of government securities or bonds. [ 2 Marks ]

(a) IMOs

(b) SMOs

(c) OMOs

(d) LMOs


Q50

"While _______ price inflation is more popular in India, the Consumer Price Index is a popular measure in developed nations like USA, UK. " [ 3 Marks ]

(a) food

(b) consumer

(c) market

(d) wholesale


Q51

The overall _______ for a country in a given year is the sum of the surplus/ deficits of current and capital accounts. [ 2 Marks ]

(a) Balance on revenue account

(b) Balance on capital account

(c) Balance of Payments

(d) Balance of recurring account


Q52

_______ typically refers to the use of borrowed funds to increase returns on any given investment. [ 2 Marks ]

(a) """Float"""

(b) """Deleverage"""

(c) """Margins"""

(d) ?Leverage?


Q53

"__________ tells us about what determines level of output in an economy, how are employment and prices determined; how money supply affects rate of interest" [ 2 Marks ]

(a) Macroeconomics

(b) Microeconomics


Q54

Commercial banks through their fractional reserve system also help create _____ in the economy. [ 2 Marks ]

(a) buffer

(b) money

(c) liquidity

(d) positivity


Q55

Inflation is the _____ of price increase. [ 2 Marks ]

(a) difference

(b) rate

(c) sum

(d) dispersion


Q56

Demand-pull inflation simply means that aggregate demand has been _______ above what the economy is capable of producing in the short run. [ 3 Marks ]

(a) pushed'

(b) ?pulled?

(c) transcended'

(d) shot'


Q57

The issuer of Currency in India is the ________. [ 2 Marks ]

(a) IRDA

(b) SEBI

(c) FMC

(d) RBI


Q58

_______ are instruments used by foreign investors not registered with the Indian regulators for taking an exposure in the domestic market. [ 3 Marks ]

(a) International Notes (INs)

(b) Participatory notes (PNs)

(c) Credit Notes (CNs)

(d) Promissory Notes (PNs)


Q59

Household savings is composed of both _______ and _______ savings. [ 3 Marks ]

(a) "real, financial"

(b) "financial, physical"

(c) "cash, real"

(d) "liquid, physical"


Q60

The insurance sector regulator in India is the ______. [ 2 Marks ]

(a) IRDA

(b) FMC

(c) SEBI

(d) RBI


macroeconomics for financial markets module

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